Settlement Agreements

Settlement Agreement Lawyers Glasgow and Paisley

Settlement Agreements are legally binding contracts normally between an employee and their employer. They are regularly used to resolve workplace disputes and are almost always initiated by the employer. The purpose of a Settlement Agreement is to end a dispute between the two parties and to set down in writing the exact terms the parties have agreed on to end that dispute.

Settlement Agreements can be used at any stage of a dispute, even after tribunal proceedings have been raised, and there is no requirement for them to result in the termination of the employee’s employment (although many do end in this way): they can be used simply to resolve any potential employment claim the employee could have whilst allowing the employment relationship to continue.

Various conditions must be met for a Settlement Agreement to be valid, such as:

The agreement must be in writing.

The agreement must relate to a specific claim that could be made against the employer.

The employee must have received independent advice from a legal practitioner. Without this the agreement is invalid.

Your solicitor will be able to advise you on whether these conditions have been met.

What does a Settlement Agreement do?

Signing a Settlement Agreement means an employee signs away the right to pursue a specified employment related claim against their employer. This is why it is absolutely vital for employees to receive the right legal advice prior to making the decision to sign. In return for the employee waiving their right to pursue a claim, the employer will provide them with some form of consideration (usually, though not always, financial) as compensation.

Settlement Agreements also frequently contain provisions on specific matters that have been agreed between the parties. Common examples being:

There are practically no restrictions on the matters that can be covered by a Settlement Agreement.

Why should you use a Settlement Agreement?

For both employees and employers there are a number of benefits to using Settlement Agreements.

For employees, a Settlement Agreement allows them to receive compensation for a dispute or complaint against their employer without having to go through the expensive and time consuming process of an employment tribunal claim, and without the risk the Employment Tribunal may not find in their favour. The employment tribunal procedure is likely to take upwards of six months, within which an employee could have no source of income, and can be an extremely stressful and emotionally draining process. A Settlement Agreement avoids this entirely and ensures the employee has some source of income while they are out of work and not receiving a regular wage. They can also contain advantageous clauses, as mentioned above, such as the promise of a good reference, being allowed to keep a company car, or being paid non-statutory holiday pay, that simply wouldn’t be possible in taking a case to a Tribunal. Another important factor is that any compensation award for loss of employment up to the value of £30,000 will, in general, be made tax-free.

For employers, Settlement Agreements avoid the potential for significant costs and negative publicity associated with defending a case against a disgruntled employee. They can also avoid the cumbersome and protracted procedures required for redundancies which, even if followed correctly, can still result in a claim being brought before the Employment Tribunal. A validly executed and legally binding Settlement Agreement will prevent an employee from being able to bring a claim before an employment tribunal and will result in the matter being brought to a close.

Do I have to sign?

Settlement Agreements are voluntary agreements and you don’t have to sign if you are unhappy with any aspect of what is being proposed. However, as mentioned above, there are significant considerations that must be taken into account in deciding to take a claim to a tribunal instead. If you feel you have a potential claim against your employer, let your solicitor know all the details. They will be able to advise you on all aspects of the agreement and any claim you may have, and will help you to make a decision in your own best interests.

How do I know if the financial award is fair?

There is no exact formula for determining whether a financial award is fair but, as a general rule, since the employee is waiving their right to bring any claim, the amount offered should reflect the value of the claim being given up.

As an employee, some questions you might wish to discuss with your solicitor regarding the fairness of a financial award would be:

Do you have a potential claim against your employer?

If so, how likely is your potential claim to succeed at tribunal?

If your claim was successful, what financial award would you be likely to recover?

Your solicitor will be able to help you weigh these up and advise on whether the award contained in the Settlement Agreement is fair and whether it is in your best interests to accept it. If you have a very strong claim you are likely to receive a much higher termination payment, and vice versa.

Getting advice on a Settlement Agreement

While Settlement Agreements are extremely useful, there are a significant amount of issues and considerations, as outlined above, which could potentially arise from their use. As it is in neither party’s interests to have a defective agreement, receiving the appropriate expert advice is therefore incredibly important.

At Macnairs + Wilson, our experienced employment solicitors regularly act for both employees and employers in providing advice on Settlement Agreements, and can guide you in a comprehensive and professional manner through the common issues likely to arise, as well as the potential effects on you and your business.

Contact our Settlement Agreement Solicitors Glasgow and Paisley

Contact our employment law solicitors in Glasgow and Paisley for advice on Settlement Agreements or any other employment issues you may have. Contact us today.